2010 driving africas-competiteness_in_agribusiness

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COMPANY CONFIDENTIAL

Africa Leadership RetreatDriving Africa’s Competitiveness in Agribusiness

July 8th, 2010

John Gregg, Director,

Monitor Emerging Markets Group

http://www.africaleadership2020.com/opening.html

2Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential

Monitor Introduction

National EconomicDevelopment and

Security

Corporate andBusiness UnitStrategy

Branding andMarketing Strategy

Financial Strategy

OrganizationalStrategy

InnovationStrategy

CapabilityBuilding

Leadership andExecutiveDevelopment

E-Learning

Network and TalentManagement

CapitalServices

Monitor Capital(MCAP)

Monitor ClipperPartners (MCP)

Monitor VenturePartners (MVP)

Other funds andfund managementcompanies

AdvisoryServices

Economic strategyand implementation

Geographicinvestment andexpansion

Constituencymapping andmanagement

Competitivenessnetwork

Focus of Today’sSession


Africa’s Agri Potential: Re-Confirmed Every 10 Years

‘Can Africa Claim the 21st Century?’ ‘Lions on the Move’

Source: “Can Africa Claim the 21st Century?” – World Bank Report, 200; “Lions on the Move: Progress and Promise of African Economies” – McKinseyGlobal Institute, 2010

Africa has huge potential for morediversified production and exports,

including in agro-processing,manufacturing, and services”

World Bank 2000

“There is still much to be gained fromyield improvements in every African

country”

World Bank 2000

“Comprehensive improvements inpolicies, institutions, and investment

could accelerate agricultural growth tolevels that would help reduce rural

poverty”

World Bank 2000

“An African Green Revolution couldraise agricultural production to $880

billion per annum by 2030”

McK Institute 2010

“Aside from midstream production,downstream processing offers the

largest opportunity”

McK Institute 2010


Agri the Primary Economic Factor in Most Countries…

Source: CIA World Factbook

Pe

rce

nta

ge

of

La

bo

ur

Fo

rce

Em

plo

yed

inA

gricu

lture

Agricultural Production % of GDP vs. % of Labour Force Employed in Agriculture, 2008

30

40

50

60

70

80

90

100

110

0 10 20 30 40 50 60 70 80 90 100

Agriculture Percent of GDP

ZambiaUganda Tanzania

Rwanda

Nigeria

Niger

Mozambique

Mali

Malawi

Kenya

Ghana

Ethiopia

Burkina Faso


… Lack of Competiveness Persists – But, Improvements

CountryGCI Rankings

(2009-2010)

Chile 30

South Africa 45

India 49

Brazil 56

Vietnam 75

Ukraine 82

Senegal 92

Kenya 98

Nigeria 99

Tanzania 100

Uganda 108

Ghana 114

Mozambique 129

Source: World Economic Forum (rank out of 133 countries). Mauritius, Botswana, Namibia, and The Gambia ranked between South Africa and Senegal

Bottom30%


Limited Use of Natural Resources …

Total land cultivated = arable land (replanted after harvest – e.g., maize, rice) & permanent crops (not replanted after harvest – e.g., fruit trees, coffee)Source: CIA World Fact Book – 2010


… And Subsistence Continues to Dominate

Small Scale and Subsistence Maize Farmers, 2004 – 2007

85

9990

70

9890

9885

7975858583

60

93

60

85

50

70

33

Tanzania Nigeria Malawi

0

Rwanda Ethiopia ZambiaMozambique

60

40

20

Uganda Mali Ghana

100

80

Small scale farmers as a % of total number of maize farmers

Subsistence farmers as a % of small scale maize farmers

0

10

20

30

40

50

60

70

80

90

Mozambique

5%

Ethiopia

11%

Malawi

17%

Tanzania

28%

Zambia

40%

Rwanda

40%

Nigeria

40%

Kenya

40%

Uganda

75%

Mali

20%

% of Maize Produced that Is Commercialised

Source: FAOSTAT; IFPRI Country Reports


At the Same Time: Significant Resource Strain …

77

7270

686665

61585756

5149494847

44444341

2725

23

0

10

20

30

40

50

60

70

80

90

SouthAfrica

ZambiaMoroc-co

BurkinaFaso

Senegal Tanza-nia

GhanaEthiopia NigeriaNigerCoted’Ivoi

re

Mozam-bique

MaliSudanCame-roon

Benin Mada-gascar

UgandaKenya AngolaMalawiRwanda

Average Losses of Nitrogen, Phosphorous and Potassium, 2002-04 Cropping Seasons

kg

/h

ap

er

yea

r

Source: “Agricultural Production and Soil Nutrient Mining in Africa“, J.Hanao & C.Baanante (IFDC


… and Climate Vulnerability

Source: “Mapping Climate Vulnerability and Poverty in Africa”, ILRI (2006


How to Leap Frog the Current Development Pace?

1,500

1,300

3,650

3,050

0

1,000

2,000

3,000

4,000

1996 1998 2000 2002 2004 2006

Cereal Yields Over Time(1996-2006)

South East Asia

Africa

Roots and Tubers Yields Over Time(1996-2006)

Kg

pe

rh

ect

are

Kg

pe

rh

ect

are

9,000

8,000

15,200

11,100

1996 1998 2000 2002 2004 2006

6,000

2,000

18,000

14,000

10,000

0

South East Asia

Africa

Source: ProdSTAT, Food and Agricultural Organization of the United Nations


Let’s Take a Step Back: Drivers of Prosperity

Competitiveness is a fundamental determinant of prosperity, andimprovements in the competitiveness of an economy create measurable,positive impacts for the prosperity of a population

The most effective path to accelerating prosperity is derived fromunderstanding and enhancing the competitiveness of a nationaleconomy

The key economic challenge facing any nation or region is the quest forprosperity


Strong Link between Prosperity and Competitiveness

Source: World Economic Forum


Clusters, not industries or sectors, are the critical unit of analysis formeasuring how an economy functions and how companies interrelate foroptimal advantage

Macroeconomic, political, legal and social context is important, but themain driver of competitiveness is the micro-economic businessenvironment which is comprised of four elements

– Factor conditions, context for firm strategy and rivalry, demandconditions, related and supporting industries

It is not what sectors, clusters, or industries a region competes in thatmatter most for prosperity, but rather how the firms compete

Guiding Principles of Competitiveness


Accelerating Economic Development – Our Framework


3 Areas of Focus to Start the Discussion

Defining aCompetitiveEconomicStrategy

Review the current composition, structure, anddynamics of an economy

Perform cluster competitiveness assessment tobenchmark performance and identify clusteropportunities that can fuel growth

1

MozambiqueCashews

EnablingCluster

Development

Evaluate the current level of cluster developmentand identify key gaps, opportunities, and constraints

Develop supply and demand-side activationstrategies to ensure cluster growth in aneconomically viable and sustainable fashion

2

Nigeria DomesticCatfish

Upgrading theBusiness

Environment

Create and implement action-oriented campaignsthat tackle underlying obstacles to competitiveness

– Includes cross-cutting and cluster-specific policylevers that will impact the context for economiccompetitiveness

3

Uganda NilePerch


Case Study – Region in Ukraine

Introduction

Project Context

A foundation was set up by an Eastern European Oligarch to improve economicdevelopment through regional programs

– Foundation financed a 2 year study to drive competitiveness of a Region

– Region’s government was responsible for funding programs in theimplementation plan

#1: Define CompetitiveEconomic Strategy

Cluster CompetitivenessAssessment

Cluster Map – Gaps,Opportunities and Constraints

#2: Enable ClusterDevelopment

Action-oriented Campaigns

#3: Upgrade the BusinessEnvironment

Analytical Approach



#1 – Define Competitive Economic Strategy



#2 – Enable Cluster Development

Fertile land but lowproductivity due to lack ofinputs & land ownershipand limited agribusiness

knowledge

Unsatisfied localdemand for fruit,vegetables, and

meat

Lack of financing andinfrastructure are key

constraints

Large shareof sub-scaleinefficientfarmers

Opportunities forcollaboration existbetween producers

and processors

Difficulty meetingquality standards

in exportdestinations



#3 – Upgrade the Business Environment

ProductionSupport

Ensure availability of fertilizers and high quality seeds

Launch educational and research programs

Increase use of modern machinery

ClusterStructure

Consolidate small-scale farmers into coops

Facilitate long contracts and partnershipswith companies downstream

OptimizedDistribution

System

Develop a Grain Exchange toreduce the number ofmiddlemen

Investmentsand Financing

Attract investors to improve agricultural infrastructure

Ensure affordable financing for cluster firms

RegulatoryEnvironment

Create efficient land markets; establishment of landregistry and development of efficient mechanisms ofland ownership transfer


Agri-Clusters in Africa – Complex Trade-Off Challenges

Export vs. DomesticMarkets

Position on GM

Smallholder / LargeScale Farming

What will the cluster focus on – production /processing for domestic or export markets?

Is it supported by government, investorsand development institutions?

What are the political vs. economic goalsand how are the trade-offs valued?

Subsidy or no subsidy - especially forfertilizer?

Inputs

Cash vs. StapleCrops

What will the cluster focus on – staple cropsor high value cash crops?


Learnings from our Recent Agri Work in Africa

Improving competitiveness in smallholder agri value chains is complexand takes time - end to end solutions are key

Important to secure downstream uptake of volumes and/or team with topof supply chain player in order to provide sustainability of upstreaminvestments and create sustainable linkages

Development of markets must be undertaken as an integrated systemintervention as typically many levers need to be touched (i.e. credit,infrastructure, farmer organization, market information, …)

Storage investments often key to enabling better decision making at thefarmgate level of small holders and in order to limit trader abritrage

Critical to make well informed trade-off decisions on where to invest interms of commodities – both from a relative competitiveness as well aslong-term climate perspective


Backup Material on Climate Change in Africa


Predicted Climate Change in Africa (1/2)

Source: “How Will Climate Change Shift Agro-Ecological Zones and Impact African Agriculture?” , P.Kurukulasuriya & R. Mendelsohn

Predicted Change in Distribution of Agro-ecological Zones with (CCC Scenario), 2003 – 2100e

OBSERVED CCC 2100

Desert

High elevation dry savannah

High elevation humid forest

High elevation moist savannah

Lowland dry savannah

Lowland humid forest

Lowland moist savannah

Lowland semi-arid

Lowland sub-humid

Mid-elevation dry savannah

Mid-elevation humid forests

Mid-elevation moist savannah

Mid-elevation sub-humid

Legend


Predicted Climate Change in Africa (2/2)

Phenomenon andDirectionof Trend

Likelihood ofFuture Trends

Based onProjections

Examples of Major Projected Impacts by Sector

Agriculture, Forestry andEcosystems

Water Resources

Over most land areas,warmer and fewer cold daysand nights, warmer andmore frequent hot days andnights

Virtually certain1

Increased yieldsin colder environments;decreased yields in warmerenvironments; increased pestoutbreaks

Effects on water resourcesrelying on snowmelt; effects onsome water supplies

Warm spells / heat waves.Frequency increases overmost land areas

Very likely2

Reduced yields in warmerregions due to heat stress;increased danger of wildfire

Increased water demand; waterquality problems, e.g., algalblooms

Heavy precipitation events.Frequency increases overmost areas

Very likelyDamage to crops; soil erosion,inability to cultivate land due towater logging of soils

Adverse effects on quality ofsurface and groundwater;contamination of water supply;water scarcity may be relieved

Area affected by droughtincreases

Likely3

Land degradation; lower yields /crop damage and failure;increased livestock deaths;increased risk of wildfire

More widespread water stress

Tropical cyclone activityintensifies

LikelyDamage to crops; windthrow(uprooting) of trees; damage tocoral reefs

Power outages causingdisruption of public water supply

Increased incidence ofcoastal inundation (excludestsunamis)

LikelySalinization of irrigation water,estuaries and fresh-watersystems

Decreased fresh-wateravailability due to saltwaterintrusion

Notes: 1 Greater than 99% probability; 2 Greater than 90% probability; 3 Greater than 66% probabilitySource: IPCC Fourth Assessment Report

2010 driving africas-competiteness_in_agribusiness

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